On Champerty, Barratry, And “Vexatious Litigants”

     by:  Peter J. Gallagher (@pjsgallagher)

One of my favorite causes of action is "champerty." I know what you are thinking — who has a favorite cause of action? Fair point. Nonetheless, champerty has always been (along with its cousins, barratry and maintenance) one of my favorites because it is a fun word to say and because it sounds so darn legal! You just sound more like a real lawyer when you say someone's conduct was "champertous." Don't believe me? Try it out.

For the uninitiated: "maintenance is helping another prosecute a suit; champerty is maintaining a suit in return for a financial interest in the outcome; and barratry is a continuing practice of maintenance or champerty." In re Primus, 436 U.S. 412, 425 (1978). Alas, although it is one of my favorites, I don't get to use champerty very often because it is not a recognized cause of action in New Jersey. Polo by Shipley v. Gotchel, 225 N.J. Super. 429, 434 (Ch. Div. 1987) ("This Court need not address the doctrines of champerty and maintenance, as they do not presently exist in New Jersey."). In fact, it has never been a recognized cause of action in the Garden State. Terney v. Wilson, 45 N.J.L. 282, 285 (Sup. Ct. 1883) ("Sometimes it has been held that the principle should not be applied to agreements of the character just mentioned because they are champertous, but as the English law against champerty is repudiated in New Jersey . . . .").


It is, however, alive and well in Pennsylvania as a recent decision from the U.S. Court of Appeals for the Third Circuit — Dougherty v. Carlisle Transportation Products, Inc. — made clear. Dougherty involved a plaintiff that the Third Circuit described as a "frequent and frequently vexatious litigator." According to the court, plaintiff was not a licensed attorney but often tried to represent his business entities pro se in federal court and also "sometimes attempt[ed] to represent the interests and assert the claims of other individuals."

In Dougherty, plaintiff claimed that he had been assigned a third-party's claim against defendant. He then sued defendant seeking to recover the alleged debt and also seeking treble damages because of defendant's alleged fraud. Defendant eventually moved for summary judgment, arguing among other things that the alleged assignment was invalid as champertous under Pennsylvania law. The district court agreed and granted the motion. Plaintiff appealed.

The Third Circuit observed that champerty was "rarely invoked in modern times" but was still a valid defense under Pennsylvania law. To prove that an assignment of a claim was champertous, a party challenging the assignment must prove that the party purporting to sue on the assigned claim: (1) had no legitimate interest in the suit; (2) expended his or her own money to prosecute the suit; and (3) was entitled to share in the proceeds of the suit." Third Circuit held each of these elements was satisfied in Dougherty — plaintiff purchased the claim in order to litigate it and without having any personal interest in the dispute, he was using his own money to finance the suit, and his agreement with the third-party from whom he purchased the claim provided that plaintiff would receive one-third of whatever was collected as a result of the suit. Accordingly, the assignment was champertous and plaintiff could not litigate it.

Finally, the Third Circuit took plaintiff to task for the tone of one of his motions, which it characterized as "rife with vituperative attacks on the integrity of [the] court, and, more disturbingly, apparent threats of lethal violence if [the] court denie[d] his requests." The court warned that "future threatening and abusive filings" might subject plaintiff to sanctions, and that these sanctions might "include a substantial monetary penalty." 

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